5.30pm: So to end with, a quick run around the markets. And it seems investors have taken the Friday night downgrades by Standard & Poor's in their stride.

The FTSE 100 has finished 20.80 points higher at 5657.44 (more here on the UK market) while Germany's Dax is up 1.25% and France has added just shy of 1%. The Italian market is up 1.4% and, just a quick reminder, there is no Wall Street influence since the US market is closed for Martin Luther King day.

European bond yields have edged lower too, amid talk the European Central Bank has been buying Italian bonds again today.

There is an exception. Portugal, where Standard & Poor's cut its credit rating from BBB- to BB, has seen its yields soar by more than 2% to 13%. That's looking dangerously like bailout territory, and no country likes to hear market talk that it could be the next Greece.

Meanwhile after S&P's move, rival Moody's said it was still reviewing France and it could also cut the country's Triple A rating if there is no solution to the debt crisis. Fitch meanwhile looked on the bright side, saying a weaker euro could be a benefit to European companies. Growth as well as austerity is the key, after all.

Tomorrow sees the arrival of the Troika - the IMF, ECB and the EU - in Greece for the latest attempt to get a deal with bondholders, following Friday's stalled talks. A Spanish bond auction is also due, which should be interesting in the wake of the S&P downgrade and Wall Street reopens, giving US investors their first chance to react to the latest eurozone developments.

My colleague Graeme Wearden will take up the blog again in the morning, but in the meantime, goodbye and thanks for all the comments.

5.10pm: Perhaps stung by criticism that Europe's officials have been - and still are - slow to act in the face of the financial crisis, the President of the European Council Herman Van Rompuy has tweeted the following:

Rating agencies sometimes consider our response as insufficient. Yet real progress has been made in reshaping the euro area.

4.57pm: More on the Greek situation. The head of the group holding Greek debt has commented on the talks which stalled on Friday but are due to resume on Wednesday.

Charles Dallara of the Institute of International Finance said:

They [Greece] are looking at the private sector to accept interest rates that they would not accept [themselves], which is completely unreasonable.

Now I know this could be seen as posturing ahead of the resumption of talks but it doesn't bode too well. A Greek default is by no means impossible.

Meanwhile more from French president Sarkozy in Spain. He has pledged support for Spain to retain its executive board seat at the European Central Bank despite its waning influence and the fact that the likes of Finland and the Netherlands are keen to take its place.

4.32pm: What a difference a downgrade makes. Not so long ago French president Nicolas Sarkozy was staking his reputation - not to mention his re-election chances - on France's prized Triple A rating.

But as a downgrade began to look inevitable, he began edging away from that position and now - after Standard & Poor's finally made its move on Friday - it doesn't seem to matter so much at all. Reuters quotes Sarkozy speaking in Madrid saying:

My deep belief is that it does not change anything. We must reduce the deficit, we must reduce our spending and we must improve the competitiveness of our economy to resume our way on the path to growth.

Talk about putting a brave face on the inevitable. And how long before the rhetoric suggesting the UK should lose its Triple A rating begins again?

3.38pm: More hot news from the European Commission. You may or may not remember that back in November the EC said it would put together a "high-level expert group" on reforming the structure of the European banking system.

Something very urgently needed, you would think, not least because of the uncertainty over the levels of solvency of many of the EU's banks in the wake of the debt crisis. So what does the expert group have to say? Well, we'll have to wait until the summer to find out, it seems. Today's announcement is that Erkki Liikanen - governor of the bank of Finland - will chair the group.

Next step: choosing the other members. Then in February the action begins, finally, with any proposals for reform due in the summer. And they say European officials have no sense of urgency.....

3.22pm: Afternoon all. The European Central Bank stepped up its bond buying programme last week, even before S&P stuck the knife into the nine eurozone credit ratings. It spent €3.77bn, up from just €1.1bn the week before and the highest level since late November. It takes the total since the ECB started its bond buying programme last May to €217bn.

And there was market talk the ECB has been buying Italian bonds today, helping offset the effect of the S&P downgrade on the country. Italian bond yields have consequently edged lower to 6.63%.

Financial markets have reacted calmly to Friday night's downgrades by S&P. Fears that shares would tumble have not materialised, with the FTSE 100 actually slightly higher this afternoon (up 10 points as I type). There was also relief that an auction of French short-term debt passed without mishap.

Greece's worsening debt crisis still dominates attention. A top IMF official warned that the world economy could be dragged down unless European officials takes more decisive moves. George Osborne also told investors that governments may need to provide the IMF with more support.

We should be worried about them, and bitterly oppose them, as they are straight from the mindset which got us in this shit and will keep us in it.

ohjesusmygoodness is concerned that the rating agencies have not been reformed since the financial crisis struck, and it became clear that they had misrated many toxic debts, saying:

We know that rating agencies face numerous perverse incentives. That is why they rated AAA something that was in fact junk. There has been no reform of the way these agencies work since 2007. The perverse incentives are still there. In these conditions, I cannot see why anyone would believe that rating agencies are today rating sovereign debt 'objectively'.

On that note, it's worth remembering that EU commissioner Michel Barnier was forced to water down his proposals to reform the credit ratings industry last November.

jackheron reckons that rating agencies are being used by unscrupulous speculators:

It looks very much like the tail wagging the dog, again. At best, cynical "markets" talking a disaster into happening so that they can make a killing on it.

The problem with the ratings agencies is that they basically do what anyone could do with the right info. But garbage in garbage out. Lehman et al had accounts that we can now see were patently inaccurate. The blame for the ratings of those entities lies not with the rating agencies but with the auditors.

2.04pm: The results of today's French debt auction are in -- and it looks like a decent result.

France managed to hit its target of selling €8.5bn of debt, and actually paid lower interest rates than at the last auction. The auction was also well 'covered' - meaning France received bids for significantly more debt than it actually sold.

This suggests that the country's downgrade to AA+ hasn't alarmed investors.

There is one proviso, though -- France was selling short-term debt this morning. A sale of 10-year bonds would give a better indication of market sentiment.

Anyway, here's the results:

• €1.85bn of 51-week bills, at an average yield (interest rate) of 0.406%, down from 0.454%. Bid-to-cover ratio of 2.108 (so more than twice as many bids as needed)• €2.192bn of 25-week bills, at an average yield of 0.295%, up from 0.286%. Bid-to-cover ratio of 2.05• €4.5bn of 12-week bills, at an average yield of 0.165%, up from 0.166%. Bid-to-cover ratio of 1.89%

Another point worth remembering is that many European banks are flush with funds following the ECB's offer of nearly €500bn of cheap three-year loans last month. That money's got to go somewhere...

1.38pm: Anti-poverty campaigners have lambasted hedge fund managers today for destabilising the Greek debt negotiations in the search for riches.

The sight of vultures swirling above Athens proves that vulture activity is neither marginal nor helpful to the functioning of the global economy. We need to crack down on this activity if the lives of millions of people are not to be decided by a handful of super-rich speculators.

So how are hedge funds supposed to be doing this? Jubilee cites three scenarios:

• If most creditors accept a write-down the funds which hold out will not need to accept any reduction in the value of the debt, and they can be paid in full• If European politicians become desperate for a deal then bailout funds might be given anyway, allowing Greece to continue paying vulture funds off, essentially with European taxpayer money.• If all else fails, Greece could be forced into a default by 20 March, in which case the funds get paid out on their credit default swaps, which act like a sort of gamble that a country will default.

If you're tempted to dismiss this as an example of typical anti-City bias from debt campaigners -- check out these articles on Reuters and Bloomberg.

@fgoria: ***French finance minister says talks on Greece not suspended, just a pause***

Maybe it's a European irregular verb -- "we've just paused, your talks are suspended, their negotiations have collapsed without agreement"?

Then again, the finance minister has a point -- we are expecting Greek officials to sit down with creditors on Wednesday. It's not clear, though, that the two sides will be closer to agreement.

12.41pm: One of the International Monetary Fund's top officials has warned that the world economy could be dragged into catastrophe unless Europe gets its act together.

IMF First Deputy Managing Director David Lipton told an audience in Asia that the stakes are incredibly high:

Europe could be swept into a downward spiral of collapsing confidence, stagnant growth, and fewer jobs.

And in today's interconnected global economy, no country and no region would be immune from that catastrophe. This is especially true for Asia.

The comments came after UK chancellor George Osborne appeared to plead for world governments to give the IMF more support.

Osborne told the Asia Financial Forum that leaders have a responsibility to "to ensure the IMF has the resources it needs to promote the global economic stability from which we all benefit".

Osborne himself hinted last week that the UK could be persuaded to lend more to the IMF if the rest of the G20 agreed. That, though, would herald a battle with eurosceptic MPs - many on his own side.

12.35pm: If you want further evidence that fiscal austerity crushes growth, look at Ireland.

Davy, the Dublin-based asset management group, has predicted that the Republic's GDP will only grow by 0.4% this year and 1.4% in 2013. This is a downgrade by Davy which had initially projected Irish GDP to grow by 1.7 per cent in 2012.

Henry McDonald, our Ireland correspondent, has more details:

Even exports, one of Ireland's success stories in the recession, is expected to slow from 4.5% last year to only 2.8% in 2012, according to Davy. The company also predicts that that employment will fall this year by 0.4%

Crucially in terms of the eurozone crisis Davy said it does not expect Ireland to hit the targets set out for the budget deficit in 2012 and 2013.

It said the main reason for its revisions downward was the deterioration in consumer and investor confidence in the euro zone.

The organisation has revised down its forecast for consumer spending growth to a 1.7% decline in 2012 before a 0.5% expansion next year.

In addition, investment spending is expected to fall by 0.2% in 2012 and to rise by 4.4% in 2013.

Goodbody stockbrokers last week also downgraded its 2012 GDP forecast to 0.7% from 1.2%.

12.24pm:Divyang Shah, senior strategist at the International Financing Review, captures the essence of S&P's concerns about Europe.

He writes that the current Eurozone rescue plan boils down to a belief that:

In order to solve the crisis, all that is needed is for peripheral countries to undertake fiscal austerity, and all that is needed to prevent a future crisis is for measures to be in place to prevent fiscal proficiency (the fiscal compact).

A comprehensive recue plan would include measures to address differences in economic competitiveness across the eurozone. Austerity, though, appears to be making that gulf even wider.

11.57am: By criticising Standard & Poor's for last Friday's glut of downgrades (see 11.35am), the EC is ignoring the advice of the Liberal Democrat alliance within the European Parliament.

Guy Verhofstadt, president of the ALDE Group, is disappointed that no European leader has actually grasped S&P's argument – that they are fixated with austerity and failing to develop a comprehensive response to the crisis.

Verhofstadt said:

Whatever one may think about the role of rating agencies in this crisis, it is clear that not a single European leader has heeded the S&P motivation for their downgrade.

They describe a monumental failure both in actually recognising the reasons for the eurozone crisis and in the ability to find adequate solutions.

I am no fan of rating agencies, but it does seem clear that they are simply describing the lack of political courage and leadership required to find a solution. They should not take all the blame for their sharp and critical assessment of the politicians' failures. Rather European politicians should read the assessments and start putting their recommendations into effect.

11.35am: The European commission has rebuked Standard & Poor's for daring to downgrade nine eurozone countries on Friday night.

EC spokesman Olivier Bailly told reporters in Brussels that the timing of the decision was "odd", and claimed that S&P didn't understand Europe's rescue plan, because:

The idea expressed by the ratings agency that Europe is pursuing a strategy based on a pillar of fiscal austerity alone is a serious misperception.

[that follows S&P's warning that austerity on its own is potentially self-defeating, as it destroys growth and makes debt problems worse.]

Bailly continued:

We take note indeed of what Standard & Poor's decided last Friday, but we believe... that it is inconsistent on substance and it's really odd as far as the timing is concerned.

Bailly also told the press conference that there was "no indication" that the EFSF bailout fund's credit rating could be downgraded.

Charles Jenkins, economist at EIU, said the EU had blundered badly by leaving Greece to haggle with its creditors without their support. This left Athens with only one negotiating weapon – the threat of default.

The mismanagement of this issue is making it more likely that Greece will default in a disorderly way and be forced out of the euro.

Jenkins is also concerned that Papademos has been badly distracted by these negotiations since being parachuted in as Greece's technocratic prime minister last November.

The Greek government has little time left to put in place credible fiscal and economic reforms before the forthcoming election likely by April and has been diverted by the fruitless negotiations on private sector involvement (PSI).

10.17am: Moody's, one of S&P's main rivals, has just announced that it will give its own verdict on France's credit worthiness by the end of March.

At present Moody's rates France as AAA with a stable outlook – which is now somewhat at odds with S&Ps view of AA+ with a negative outlook. Moody's told the City this morning that it is 'still assessing' its rating, and will make a decision by the end of Q1 2012.

Moody's said that:

France's AAA rating could come under pressure if its debt/GDP ratio continue to rise and if the euro debt crisis worsens.

A second downgrade would be a major blow to Nicolas Sarkozy. Moody's won't act straight away, though – typically, an agency would lower a country's outlook to 'negative', then put it on 'Creditwatch' before finally cutting the rating.

France is currently rated AAA with negative outlook with Fitch (the third member of the Big Three) – so Moody's is currently taking the most optimistic view of France.

10.14am: Slovakia has shrugged off the impact of being downgraded by S&P – it successfully sold €294m of 12-month debt this morning, or twice as much as it had targeted.

The yield (or interest rate) on the bonds also fell slightly, to 1.96% from 2% last time.

9.58am: One interesting snippet of credit rating news from outside the eurozone -- Fitch has just lowered its outlook on Russia from Positive to Stable.

That means there's much less chance of Russia being upgraded from BBB anytime soon.

Fitch said that the global economic outlook has worsened, while political uncertainty in Russia has increased. That means there's more risk of investors pulling their money out of Russia, and less chance of a robust fiscal stimulus package if the economy hits crisis.

Despite running a larger deficit and national debt than France, the UK is obviously less directly vulnerable to the eurozone crisis than our friends over the channel. Britain also has the advantage of control over its currency -- Sir Mervyn King and the MPC can ease monetary policy as much as they see fit, and buy up huge quantities of government debt through QE too.

9.21am: Greek workers are planning to mark the return of international inspectors to Athens tomorrow, by going on strike.

Helena Smith, our correspondent in Athens, has the details:

Militant communist-backed labour unionists are bracing for strike action in Greece tomorrow. It will be the first major industrial action of the new year and is well-timed: come dawn the first team of inspectors from the EU, IMF and ECB will have descended on Athens and they're not in the best of moods.

Book checking in the coming weeks will intensify as they evaluate whether Greece, under its new interim coalition government, has gone beyond "talk talk" and is actually walking the walk in terms of finally enacting economic and structural reforms.

We're also expecting tough negotiations between Greece's business owners and workers' unions when they meet on Wednesday to discuss possibly freezing pay and lowering the minimum wage. All part of the drive to make the Greek economy "more competitive"...

Lucas Papademos. Photograph: KeystoneUSA-ZUMA/Rex Features

9.05am: Greece's prime minister has insisted that the country will not be forced out of the euro and back to the drachma.

Lucas Papademos told CNBC that quitting the eurozone "is really not an option". The unelected leader also claimed that negotiations with Greece's creditors are going well:

Our objective is to complete the two processes and also to fulfill our commitments that have been made in the past … and we are confident that we're going to achieve this.

But, but... talks over the Private Sector Involvement broke up on Friday without agreement, with the banks' negotiators demanding a suspension and admitting that progress was disappointing.

Not according to Papademos, who argues that the 'little pause' in talks (they should restart on Wednesday) doesn't matter, as Greece and its creditors are still hammering out a deal.

Some further reflection is necessary on how to put all the elements together. So as you know, there is a little pause in these discussions. But I'm confident that they will continue and we will reach an agreement that is mutually acceptable in time.

Time, though, is running out. Greece has got to agree a debt reduction deal with its creditors soon, so it can get its next aid tranche by March (when it must repay €14bn of maturing debt).

Papademos may not want to go back to the drachma – but if the PSI talks go sour, he may not have a choice....

8.43am: The amount of money being stashed overnight with the European Central Bank has hit yet another record high this morning – and is approaching half a trillion euros.

The ECB reported this morning that it accepted€493.2bn in overnight deposits from European banks on Friday evening. The amount being borrowed through its overnight loan facility also increased, to €2.38bn (from almost €1.5bn).

The overnight deposits figure has been hitting record levels in recent weeks, ever since the ECB pumped almost €500bn of cheap loans into the system. So what does this mean?

Some analysts say it is a clear sign of stress in the financial sector – with banks choosing to leave their assets with the ECB at a very low rate of return rather than lending them.

ECB head Mario Draghi has rubbished suggestions that the ECB's plans have backfired. Last week, he insisted that the banks who took advantage of the cheap loan splurge are "by and large" not the same banks who are now depositing their funds with the ECB overnight.

Either way, €493.2bn is a lot of money to be switching between commercial banks and the ECB's electronic vault.

8.28am: Germany's finance minister took to the airwaves this morning to insist that Europe's bailout fund will not be thwarted by S&P.

Wolfgang Schäuble told German radio channel Deutschlandfunk that Germany will not be forced to increase its guarantees to the European Financial Stability Facility (EFSF), to make up for France's downgrade.

Schäuble insisted that Germany's current pledge of €211bn will be quite sufficient, because:

The heads of government and states have decided to get the ...permanent European Stability Mechanism (ESM) to supercede the EFSF already this year...

For the job that the EFSF has in coming months, the sum of guarantees is easily sufficient.

S&P stated on Friday night that the EFSF could still keep its own AAA rating if other countries increased their guarantees to make up for France's loss of firepower [France and Germany are the two major backers of the EFSF, which raises funds for countries frozen out of the markets].

Schäuble appears to be suggesting that Germany won't cough up – so an EFSF downgrade could soon follow.....

8.18am: Europe's financial markets are open, and there's no sign of panic.

In fact, the FTSE 100 has broken into positive territory (up 4 points at 5641).

Other markets are stuck in the red, though, with the Spanish IBEX down almost 1% in early trading and the French CAC losing 0.5%.

Nothing to get alarmed by, though. That reflects the fact that the S&P ratings cuts were expected.

As Stan Shamu of IG Markets commented this morning:

These downgrades should not have come as much of a surprise. In retrospect we may look back on them as the most flagged and blatantly obvious downgrades in history.

8.08am: It's not a particularly busy day for economic news, but the bond markets should be busy. The highlight is probably an auction from France – will the AAA downgrade push up its borrowing costs?

+ George Osborne visiting Hong Kong + Wall Street is closed for Martin Luther King day

7.54am: What do you think about Standard & Poor's decision to downgrade nine eurozone countries?

Economic affairs commissioner Olli Rehn was quick to criticise, calling the move "inconsistent" at a time when the eurozone was taking "decisive action" to tackle the debt crisis.

Portugal also took badly to being relegated to Junk status, saying it "disagrees with S&P's assessment".

So is it simply a case of shooting the messenger? Or are ratings agencies simply taking on too much power? Should we even be worried about S&P's views?

Here's a reminder of the nine countries downgraded by S&P:

France: Downgraded by one notch, from AAA to AA+. Negative Outlook.Austria: Downgraded by one notch, from AAA to AA+. Negative Outlook.Malta: Downgraded by one notch, from A to A-. Negative Outlook.Slovenia: Downgraded by one notch, from AA- to A+. Negative OutlookSlovak Republic: Downgraded by one notch, from A+ to A. Stable Outlook

Cyprus: Downgraded by two notches, from BBB to BB+. Negative OutlookItaly: Downgraded by two notches, from A to BBB+. Negative OutlookPortugal: Downgraded by two notches, from BBB- to BB. Negative OutlookSpain: Downgraded by two notches, from AA- to A. Negative Outlook.

7.45am: Good morning, and welcome to another day of rolling coverage of the eurozone financial crisis.

The situation in Greece worsens by the day. Talks between the Greek government and private lenders over a plan to reduce Greece's debt by $130bn are now frozen until Wednesday. But the political pressure will continue to build on Lucas Papademos's government, with speculation over a disorderly default growing.